Swiss plumbing materials supplier Geberit has forecasted flat organic sales for 2024, citing weak construction activity in Europe, a projection that falls short of market expectations. The company's shares dropped by 3.9% as of 0941 GMT; making it one of the worst performers on Europe's STOXX 600 index.

Geberit, whose products are used in both new builds and renovation projects, anticipates an overall decline in the construction industry in 2024, with the most significant downturns expected in Northern Europe, Germany, and Austria. Germany's property sector, currently in its third year of decline, is experiencing its most severe slump in decades.

The company's sales forecast suggests an organic decline in the second half of the year, despite a 1.7% increase in the first half when adjusted for negative currency effects. CEO Christian Buhl highlighted that the outlook is clouded by uncertainties regarding wholesalers' inventory levels and a higher comparison base in the fourth quarter of the previous year.

Geberit also projected that its core profit (EBITDA) margin for the year would be around 29%, a decrease from 29.9% in 2023. This margin guidance and the flat sales outlook were both below consensus expectations, which had anticipated organic growth of 1.1%.

For the first half of the year, Geberit's EBITDA fell by 1.6% to 518 million Swiss francs ($599 million), resulting in a margin of 31.6%. The company expects this margin to decline in the second half due to typical seasonal factors. The combination of record-breaking inflation and higher interest rates in Geberit's core markets has led both consumers and companies to delay construction projects in an effort to conserve cash. This trend has similarly impacted other construction sector suppliers, including Heidelberg Materials and Holcim, which have recently reported lower sales figures. (ET)